Mortgage Guarantee Scheme

95% LTV Mortgage Guarantee Scheme

The government announced a new initiative in the March 2021 budget, in an attempt to assist those requiring a 95% loan to value mortgage. The new scheme is the 95% LTV Mortgage Guarantee Scheme and is to take effect from April 2021.

Why has the scheme been introduced for 95% mortgages?

During the Covid 19 pandemic virtually all lenders withdrew their higher loan to value mortgage products leaving those with what is regarded as a smaller deposit, unable to obtain a mortgage. Those providers that did continue to offer them, mostly only did so where third party assistance was available such as a family member to help with the “deposit” by means of other security or guarantees.

Whilst we have seen a healthy return of 90% loan to value options, the 95% sector still remains scarce. The government has therefore introduced the 95% LTV Mortgage Guarantee Scheme to encourage lenders to re-enter this market.

How does the Mortgage Guarantee Scheme work?

The scheme is designed to help those get on the property ladder who have a 5% deposit. The mortgage company is still providing 95% of the purchase price or valuation, whichever is lower, and the purchaser puts in the remaining 5%.

The guarantee element of the scheme is provided by the government for the lender only and as such it is hoped this will give the lender a greater appetite for providing mortgages at 95%. Whilst this guarantee proved some assurance to the lender, it does not therefore mean that they will take any different view on their assessment of your ability to borrow the funds. Affordability will still be an important factor as will credit history.

Risk is always a factor that lenders need to consider, and to offset the regarded higher level of this when lending at 95%, together with the higher capital allowances lenders have to cater for when offering the higher loan to value schemes, expect the rates available to be that much higher than those offered at 90% and below. Also, not all lenders will participate so there may be a restricted level of choice.

Who is eligible for the Government Guarantee Scheme?

The scheme is open to first time buyers and homemovers alike, and for any property including new builds and those on resale.  This differs to the current popular Help to Buy shared equity scheme where this is now restricted to first time buyers and new build properties only.  The 95% LTV Mortgage Guarantee Scheme does have a maximum purchase price of £600,000.

How can I find out more about 95% mortgages?

As with many schemes designed to assist people to purchase their homes, there can be many elements of criteria and numerous sources of information. Here at Just Mortgage Brokers, we understand how confusing this may all appear and this is why we have fully trained advisers who are fully versed in all the schemes available, including the 95% Mortgage Guarantee Scheme. Why not contact us today and we will be pleased to run through all the ins and outs with you.

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